1. This is a second appeal by the unsuccessful plaintiff who has lost his suit for specific performance in both the Courts below.
2. The facts leading up to this litigation are briefly these. On 10-7-23 defendant No. 1, namely, the Municipality of Puri, granted a lease of 500 acres of land on the Beach Road to one Chandramoni Devi, the period for which the lease was to run being stipulated as twenty years. The lessee-assigned her leasehold interest by four different sale-deeds, to four different persons including the plaintiff, and his brother, Dr. Radha Kumud Mukherjee. Under these assignments the plaintiff and his brother, each acquired 120 acres of the entire lease-hold by virtue of two sale-deeds dated 26-5-1925. The other vendees from Chandramoni Devi were one Promode Sundari and one Amiya Nath Mukherjee.
By an identure made on the 10th January 1944, defendant No. 1 granted a lease of the plot purchased by the plaintiff from Chandramoni Devi, to defendant No. 2, and by a subsequent sale-deed dated 9-6-1944 the second defendant conveyed the very same property to defendant No. 3. The case for the plaintiff is that he is entitled to a renewal of the lease granted to Chandramoni Devi his vendor in respect of the plot purchased by him from her and on the same terms and conditions as were contained in the original lease.
The main contest put forward on behalf of the municipality is that there was a breach of one of the terms of the lease by the plaintiff and that, accordingly, he was not entitled to exercise the option of having the lease renewed as provided for therein. The municipality therefore contends that it was entitled to regard the original lease as having been cancelled and grant the plot in question to defendant No. '2. The plea of defendant No. 3 is that she was a bona fide purchaser of the plot for value without notice of the prior contract in favour of the plaintiff by the Municipality, and that therefore the plaintiff should not be allowed specific performance of the lease as against her.
3. Some of the terms of the lease granted to Chandramoni Devi which have a bearing on the decision of the dispute between the parties are given below:
' Clause (3): That you shall not by any means or in any way whatsoever transfer your holding or any portion thereof to any other person, without previously obtaining the written permission of the Chairman to do so and paying a transfer fee equal to 121/2 per cent, of the consideration money, provided that no such fee shall be less than one rupee.
Clause (4): That you shall enjoy the fruits of all the trees on your holding but shall not cut down or in any way injure such trees without the permission of the Chairman.
Clause (8): That the house that you shall erect shall be at least 10 feet away from the edge of the road and shall be constructed on a plan to be previously approved by the Chairman.
Clause (13): That the lease may be cancelled by the Chairman if the building is not completed within 12 months of the date on which it was executed or within such further time as the Chairman may allow. On such cancellation the Chairman may, by notice in writing, require the lessee to remove within a reasonable time any plot (sic) which may have been commenced and not completed, or the materials which may have been collected on the land, and if he fails to comply with such notice the Chairman may, after giving further notice in writing specifying the time, cause such removal to be effected and recover the costs from him.
Clause (17): That on the expiry of the term of this lease you shall, if you have duly observed all the conditions thereof, be entitled to its renewal, on such terms as may be agreed upon, the rent being liable to enhancement on such renewal.
Clause (20): That in the event of the infringement of any of the above conditions the lease shall, ipso facto, terminate at once and you shall quit the holding as soon as you are required in writing by the Chairman to do so.'
4. The defendant municipality's contention is that Clause (13) of the Covenant has not been complied with as a building was not put up within 12 months of the date of the lease and that, therefore, under Clause (20) the lease ipso facto terminated. It is not the case of the municipality that the original lessee, namely Chandramoni Devi, did not put up a building within one year of the lease, but that the plaintiff did not do so, within a year after his purchase of the lease-hold interest from his vendor, namely the original lessee. The plaintiff meets this contention by saying that the covenant regarding the putting up of a building contained in Clause (13) had been duly complied with by the lessee Chandramoni Devi and that it is not necessary for each of the assignees from the original lessee to put up buildings on the plots purchased by them.
The point is which of these rival contentions is correct. The second contention on behalf of the defendants, generally, is that the plaintiff is not entitled to specific performance of a part of the contract and that the contract should be enforced either as a whole or not at all. It is accordingly argued that the plaintiff in so far as he asks for renewal of the lease in respect o the portion that he has purchased is not entitled to specific performance. The third contention which is raised only on behalf of defendant No. 3 is that she is a bona fide transferee for value and that specific performance cannot be decreed against her as she had no prior notice of the pre-existing contract between the plaintiff and the municipality. I shall examine the validity of these three contentions seriatim.
5. I shall take up the first contention first. The proved facts are that the original lease-hold property has been, by mutual agreement between the parties, subdivided into four parcels and each of the assignees except the plaintiff, has been granted a renewed lease by the Municipality at an enhanced rent. It is not claimed for the Municipality that the lease in favour of Chandramoni Devi was ever cancelled for non-compliance with any of the terms of the lease. The trial Court found that Chandramoni Devi had not and the appellate Court found that she had, completed the construction of the house within the stipulated time. We see no reason to disbelieve the evidence of P.W. 1, the husband of the original lessee or to differ from the finding of the lower appellate Court that there was a complete compliance by the original lessee with the condition of the lease.
It has also been admitted that the assignees from Chandramoni Devi of the different parts of the house-hold were recognised by the defendant municipality and that they have been paying their shares of the apportioned rents since the mutation of their names in the municipal registers, it is further admitted that the renewal clause of the covenant has been availed of by the other assignees and separate leases for the severed plots of the lease-hold have been granted by the municipality. These circumstances clearly indicate that the lease-hold interest has been severed by agreement of the parties and each of the assignees is entitled to enforce the term providing for the renewal, so far as his separated part is concerned irrespective of the others. .
6. There is no evidence that the plaintiff was ever called upon to put up a building within one year of his purchase, or that any notice was taken of his negligence by the municipality. It must, therefore, be held that the terms and conditions of his holding the land are to be determined with reference to the original lease in favour of his vendor. If, as has been found by the lower appellate Court Clause (13) of the covenant has been complied with, the lease must be held to be still in force, and the plaintiff as the assignee of a portion thereof is entitled to take advantage of, the renewal clause in respect of the portion purchased by him.
7. In the judgments of both the Courts below, there was some discussion as to whether the covenant stipulating for the renewal of the lease is one running with the land or is independent of it. A covenant entered into between a lessor and a lessee is primarily binding as between the two personally. But upon an assignment either of the reversion or of the terms, it may also be binding on the grantee of the reversion or the assignee of the terms; and similarly, the benefit of a covenant may pass to these parties respectively. There may be covenants for the benefit of the lessor, or there may be a burden on the lessee. Whether a covenant runs with the land would depend partly on the nature and partly on the form of the covenant.
It is said to run with the land if it directly concerns the land as, for example, covenant to pay rent, to repair houses already built, to insure against fire, to use premises as dwelling houses only, or to manure the land if it is an agricultural land; and such covenants will bind the assigns. If the covenant is one by the lessor for the benefit of the lessee and directly touches or concerns the land it runs with the land in favour of the assign. See -- 'Simpson v. Clayton', (1838) 8 LJCP 59 (A). An option to renew the lease runs with the land and the lease-hold interest, and so both the lessors' and the lessees' successors-in-title are bound.
'Unlike an option to purchase an option to renew the lease is not affected by the rule against perpetuities...... It is an interest in land capable of assignment and upon bankruptcy of the lessee the option vests in his trustee in bankruptcy';--see Redman's Law of Landlord and Tenant, p. 125.
Having regard, to the nature of the lease in the instant case both the covenant requiring the lessee to put up a building on the leased premises and the covenant relating to the renewal of the lease, are covenants running with the land and the assignees of the lease consequently incurred the liability to perform and acquire the right to take advantage of the covenants. The liability to put up a building having been discharged by Chandramoni Devi the original lessee the right to exercise the option of renewing the lease passed to the assignee, namely, the plaintiff.
The extreme contention put forward on behalf of the municipality, that every assignee of a part of the tenement is bound to put up buildings on the parcel of land assigned to him, is unreasonable and by the very nature of the thing, is impossible of performance. The lessee could have used the lands, other than those required for putting up buildings, in any manner she liked; she could have raised a garden or put up a gymnasium. The only liability that she undertook under the lease had been discharged by her and when the lease was assigned to the plaintiff the assignee was at liberty to take advantage of the covenant in the same way as the lessee could have done.
Clause (3) of the lease permitted transfer of the holding or a portion thereof, with the previous permission of the Chairman of the Municipality. It was open to the Chairman of the Municipality to withhold permission to recognise the assignment in favour of the plaintiff, or to insist upon a new lease being executed by the plaintiff, making it obligatory on him to put up a building on the portion assigned to him. None of these things was done. It is clear therefore that neither the terms of the lease nor the subsequent conduct of the parties would warrant a finding in favour of the municipality. I would accordingly hold, in agreement with the view of the lower appellate Court that the covenant imposing a burden on the lessee has been complied with and that the advantage of the renewal clause is available to the plaintiff, the assignee of the lessee.
8. Even if the recognition of the plaintiff by the Municipality as an assignee of a part of the demise is to be regarded as a fresh lease on the terms of the original lease, the fact remains that the period of twenty years stipulated in the lease did not expire on 10-7-1943 and certainly not on the date when the Municipality granted the lease in respect of the same land to defendant No. 2 for the plaintiff would be entitled to a period of twenty years from the date of mutation of his name and recognition of his assignment by the Municipality. This fact, by itself, would show that there could be no question of the old lease being replaced by a fresh contract with the plaintiff. The original lease still holds the field and would govern the rights of the parties. The first contention, raised on behalf of the Municipality, must therefore be overruled.
9. The second contention raised on behalf of the defendants, generally, is however not so easy to dispose of, The proposition advanced is that even if the plaintiff be held entitled to specific performance of the covenant for renewal of the lease he cannot sue in respect of only a part of the lease. As I have already indicated earlier the lease-hold interest had been severed by agreement between the parties. Both the Courts below appear to have accepted the above contention raised on behalf of the defendants relying on the case of -- 'Secy, of State v. Volkart Brothers', AIR 1928 PC 258 (B).
In that case the lessees had sold their right, title and interest in the greater part of the demised lands and claimed a renewal in respect of the remaining lands in their possession. The Judicial Committee held that on a true construction of the covenant, the respondents were not entitled to claim renewal. Before considering the facts of that case, I think it necessary to refer to another decision of the Judicial Committee reported in -- 'William Graham v. Krushna Chandra', AIR 1925 PC 45 CO. There the Judicial Committee has laid down that Sections 14 to 17 of the Specific Relief Act constitute, with regard to the specific performance of a part of the contract, a complete Code within the terms of which relief of that character must be brought if it is to be granted.
Section 14 of the Act enables the Court to direct specific performance of so much of a contract as can be performed if the part which must be left unperformed bears only a small proportion to the whole or does not admit of compensation in money. Section 15 deals with a case where the part which must be left unperformed bears only a small proportion to the whole in value and does not admit of compensation in money. In that case the party in default is not entitled to obtain a decree for specific performance. But the party not in default may claim specific performance, provided he relinquishes his claim to further performance and all rights to compensation.
Section 16 deals with divisible contracts and is as follows:
'When a part of a contract which, taken by itself, can and ought to be specifically performed, 'stands on a separate and independent footing' from another part of the same contract which cannot, and ought not, to be specifically performed, the Court may direct specific performance of the former part.'
This section contemplates a contract parts of which are separate and independent. If the contract is actually divisible and the Court enforces what is apparently a part, it really enforces the entire and complete contract. The expression 'stands on a separate and independent footing' points to a limitation which would exclude any new bargain, and cannot be said performance of a part of a contract where the other parts have already been performed the Court is not introducing a new bargain, and Section 16 is a statutory warrant for enforcing a part which can and ought to be performed.
The decision of the Privy Council in -- 'Secy, of State v. Volkart Brothers (B)' did not turn on the construction of any of the provisions of the Specific Relief Act and their Lordships (had?) no contract to renew the lease for a part of the premises. The judgment of the High Court of Madras in that case is reported in -- 'Secy, of State v. Volkart Bros.', AIR 1927 Mad 513 (D) and it gives the facts and reasoning of Krishnan J. showing why Section 16 of the Specific Relief Act was not' applicable to the facts of the case.
His Lordship observed:
'Section 16 also does not apply as we have not got here, in my opinion, part of a contract which stands on a separate and independent footing from the rest. If the suit contract could be divided up into two contracts, one with the respondents for their plot and the other with the Cochin Club for theirs, the section may apply. But I am unable to see what justification there is for holding that the lessees can by any means by their own unilateral act, without any reference to or consent of the lessor, split up into two his contract for a single lease to renew the whole plot as one plot. The United Company entered into a single contract to renew with reference to the whole of the land. I am unable to see how they can be compelled to perform that contract piecemeal.'
In the instant case before us, the suit contract has been divided up into four contracts not by unilateral action but by consensual authority. What was at one time a single contract to renew the lease of the whole of the land, has been split up into four leases piecemeal and, in the language of Section 16, each of them 'stands on a separate and independent footing' from the rest. It is well established that where a tenement is subdivided, each tenant holds his share in severality. Where there are tenants-in-common, with undivided moieties there is only one tenement in the whole of which each tenant shares. Each tenant-in-common has an estate in the whole of the single tenement and there is privity of estate between him and the landlord; and each is liable for the whole rent.
But where the land has been divided, as well as the rents due on the separate parcels, as indeed is the case here, the covenant is divisible and the tenants are not in the same position as tenants in common. His estate does not extend over the whole of the land leased, and I see no reason why either on principle or on authority he should not be protected in his possession. The case of -- 'Volkart Brothers (D)' is easily distinguishable on the facts as that was a case of tenants-in-common.
10. The ordinary rule is that a part of a contract shall not be specifically performed except in cases coming under one or other of Sections 14, 15 and 16. Where the part which it is impossible to enforce has already been performed Court; will decree specific performance of a contract: --'Hope v. Hope', (1856) 52 ER 1143 (E). Where a contract to grant a lease also contained a covenant giving the option to purchase, the Court decreed performance of the contract of sale although the covenantee had forfeited the right to obtain a lease as the contract was separable: -- 'Green v. Low', (1856) 22 Beav 625 (F). In --'Subramania Iyer v. Kalyanasundaram Iyer', AIR 1919 Mad 374 (G), Oldfield J. observed that if the plaintiff could show that the portion of the property which he claimed can reasonably be enjoyed independently of the remainder specific performance would be decreed.
In -- 'Shama Charan v. Kumed Dasi', AIR 1918 Cal 889 (H), the first defendant professed to enter into a contract on his own behalf as well as of the other members of his joint family. It turned out that his co-sharers were not willing to abide by the contract but the share of the first defendant was large enough for the purpose of compliance of the contract made by him with the plaintiffs. The Court ruled that specific performance could be granted to the plaintiff in respect of the first defendant's share of the property.
11. But apart from authority the inclination of my mind is to uphold the plaintiff's claim as no injustice will be done to the Municipality by decreeing specific performance. It is obvious that the original lease was granted to a lady who did not have money enough to complete the whole of the building which she had undertaken to erect. To enable her to raise funds for the purpose the contract was made divisible and she was permitted to assign her lease-hold interest to different persons. As soon as she put up the building she could enter into the market for raising money to enable her to complete the rest of the contract. If that was her right, is the plaintiff in any worse position? The plaintiff did not take upon himself to put up a building on the plot purchased by him from Chandramoni Devi. No injury has resulted to the Municipality by treating the contract as separable.
They have got a portion of the property leased out covered with a building. With regard to the remaining ground, in the occupation of the plaintiff, they still retain exactly the same right as they had under the original agreement, and that right is the right to enhance the rent. It is, therefore, idle to contend that the plaintiff must seek performance of the whole contract or none at all. Having given our best consideration to the facts and circumstances of this case, we have no hesitation in holding that the contract in favour of the plaintiff stands 'on a separate and independent footing' and is severable from the rest of the contract. The contention of the Municipality based on this ground, must accordingly be held to be untenable.
12. The third contention was raised by learnedcounsel appearing for defendant No. 3. Thatdefendant claims to be a bona fide purchaser forvalue, without notice of the earlier contract, andseeks to resist the plaintiff's suit. Some casesunder S. 41 of the Transfer of Property Act werecited before us, but in our judgment they haveno application to the facts of the instant caseand need not be noticed. For the purpose ofdeciding this appeal, it will be sufficient to referto Section 27 of the Specific Relief Act. Thatsection says that specific performance of a contract may be enforced against either party thereto, and against any other person claiming underhim by a title arising subsequent to the contract,except a transferee for value who has paid hismoney in good faith and without notice of theoriginal contract.
The Section throws the onus upon the transferee to establish that he had no notice of the original contract. The third defendant did not examine herself, but examined one Bhajanananda Mohanty as D. W. 3 whose evidence, however, is too artificial to be accepted. He says that he was looking after the purchases on behalf of defendant No. 3, but that he was not aware of the prior lease of this property. He, however, admits that he did not make any enquiry in the matter. Although he claims to have been looking after the purchases the sale-deed in favour of defendant No. 3 shows that he took no part at all in the transaction. The stamps were all purchased by defendant No. 3 herself; and the document was registered at the residence of the vendor, defendant No. 2, where she was identified by one B.C. Mohanty. D.W. 3 does not even figure as an attestor to the deed and the document appears to have been attested by one Kalipada Ghatak, the Manager of the Darjeeling Bank.
We are not therefore inclined to place any reliance on the testimony of this witness. In the circumstances, we must hold that defendant No. 3 has failed to discharge the onus that was cast upon her under Section 27 of the Specific Relief Act. Exhibit 5, the resolution of the Municipality would also clearly indicate that defendant No. 2 the vendor of the third defendant had clear notice of the petition of the plaintiff praying for renewal of the lease and its rejection by the Municipality. The sale deed in favour of defendant No. 3 also specifically refers to the lease granted by the Chairman of the Municipality on 27-3-1944 in favour of the vendor, defendant No. 2. In spite of these facts having been brought to the notice of defendant No. 3 it is idle for her to contend now that she is a bona fide purchaser for value without notice of the prior contract in favour of the plaintiff.
13. We would, therefore, allow this appeal, set aside the judgments of the Courts below and grant a decree to the plaintiff in terms of the plaint. The plaintiff is entitled to a renewal of the lease on the enhanced rent fixed by the defendant-municipality, subject to the terms and conditions of the original lease except the covenant relating to the obligation of putting up a house within twelve months. The trial Court will call upon the plaintiff to file a draft lease on these lines for being executed by defendant No. 1. The plaintiff shall be entitled to take possession of the suit plot by evicting defendants 2 and 3 therefrom. The plaintiff will also be entitled to the costs of this litigation throughout. Hearing fee in this Court is assessed at Rs. 100/-.
14. I agree.